USA stocks dive amid rate hike fears

"Asset prices and the economy have become addicted to low rates", said Peter Boockvar, chief investment officer at the Bleakley Financial Group.

Traders and financial professionals work on the floor of the New York Stock Exchange ahead of the opening bell, February 2. With increased inflation worries, that same 10-year Treasury bond now yields 2.83 percent. Equities are being tested by the surge in bond yields, with some fund managers saying three per cent USA 10-year rates would signal a bond bear market.

"We've been expecting a pullback for a while, said Gene Goldman, head of research at Cetera Financial". This was the strongest wage gain in more than eight years and raises the specter of increased inflation.

USA stocks closed sharply lower after an upbeat jobs report sent interest rates up. It also caused Wall Street economists to strengthen their predictions of three rate hikes from the Federal Reserve this year. "Now it looks like three to four more hikes".

In corporate news, Motorola Solutions Inc (NYSE:MSI) climbed 6.8% to US$105.81 after announcing last night it is to acquire Canadian company Avigilon Corporation (TSE:AVO). "The easy money had been made, and it will be more challenging to extend the gains as interest rates move higher". The S&P 500 Index closed at 2,762.13 for a loss of -59.85 points or -2.12%.

It was the worst day for stocks since President Donald Trump took office. Experts have disputed Trump's assertions, arguing that the growth is consistent with a years-long economic upswing.

The gap between 10-year Treasury Inflation Protected Securities (TIPS) and the 10-year Treasury notes reached its highest level since September 2014. Energy shares sank 4.1 per cent as earnings disappointed and crude slumped.

Revenue of US$66.52bn was also way short of expectations of US$74.44bn.

O'Hare said lackluster earnings added to the selling momentum, with some of the biggest U.S. companies suffering dramatic declines after disappointing the market.

Fast-rising wages could prompt more aggressive action from the central bank to keep a lid on inflation pressure.

Some investors called the tail-end of the bull market a "melt-up" - with USA shares continuing to rise despite looking overpriced by traditional yardsticks, warning it was a last hurrah before a downward correction or crash.

Net income in the fourth quarter rose to US$3.11bn, equivalent to US$1.64 a share, from US$415mln (22 cents) a year earlier.

"This is a continuation of weakness we saw earlier this week", Schulze said".

In the S & P 100, Exxon also was the worst performer, followed closely by Google (-5.23% at 10:00 am).